Tag Archives: Great Depression

How will the coronavirus recession compare with the worst in Australia’s history?



State Library Victoria

John Hawkins, University of Canberra

In a normal year we would be weeks away from the May budget and the official forecasts for the financial year ahead.

This year there will be no official forecasts until October 6, the date of the postponed budget.

It might be just as well.

The finance minister Mathias Cormann says it is nigh impossible to make realistic and credible forecasts in the current environment.

He might also be worried that publishing negative forecasts creates the risk of self-fulfilling prophecies. (It’s an important difference between economic and weather forecasting – predicting rain does not make rain more likely.)

But on Tuesday Treasurer Josh Frydenberg saw fit to release details of Treasury forecasts of a 10% rate of unemployment, which he said would have been 15% were it not for the JobKeeper allowance, so such concern can’t be universal.




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Even before COVID-19, the Australian economy was tepid, with the bushfires and weak wages growth dampening consumer spending.

Now the cat is out of the bag.

Overnight the International Monetary Fund released shocking updated forecasts. Australia’s 2020 recession will dwarf those that came before it.


Australian calendar year economic growth

Growth through the year to December, IMF through-the-year-forecasts for 2020, 2021.
ABS National Accounts, IMF World Economic Outlook April 2020

The IMF expects real gross domestic product to shrink by 7.2% throughout 2020.

This is much larger than the falls in real GDP in the early 1980s drought-related recession (2.2% throughout 1982) or “the recession we had to have” (1% in 1991).

To find larger falls it is necessary to go back to the depressions of the 1890s and 1930s.

The Great Depression is one parallel

Australia’s 1890s depression was the result of a global slowdown, the bursting of a speculative property bubble (particularly in Melbourne), bank failures and the prolonged Federation Drought.

Australia’s 1930s Great Depression also followed some speculative excesses but was primarily a response to the global economic slump.

Both depressions predated the acceptance of Keynesian economics in which it was understood that the best way to deal with a decline in private spending was for governments to increase public spending.




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Instead, back then, governments tried to get their budgets to balance by cutting their spending, making matters worse.

Those depressions occurred well before statistical agencies compiled national accounts.

But a survey of retrospective estimates I did with Robert Ewing suggested that during the Great Depression real GDP may have contracted by 10% to 20%.

The Asian Economic Crisis is another

A more recent parallel to the size of the current fall in Australia’s GDP is the experience of some of our neighbours in the 1997 Asian financial crisis. In 1998 it brought about huge falls in real GDP in Indonesia (13%), Thailand (8%), Malaysia (7%), Hong Kong (6%) and South Korea (5%).

The current contraction has been unusually rapid and it is hoped that the recovery will be too.

The IMF predicts Australia’s GDP will expand by 8.4% in 2021 after falling 7.2% in 2020. It believes we are in the worst of the recession now and the recovery will begin in the September quarter that starts in July.

In year-average terms that understate the size of swings the IMF expects real GDP to shrink 6.7% in 2020 compared with 2019 and then to grow 6.1% in 2021 compared to 2020.




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It has revised down its forecast for global growth this year from an increase of 3% to a contraction of 3%. (By contrast, during the global financial crisis global GDP slipped by only 0.1%)

What it terms the “Great Lockdown” is the worst global economic scenario since the Great Depression.

Worse outcomes “possible, even likely”

The US economy should contract 5.9% this year before bouncing back 4.7% in 2021. China’s economy should barely grow in 2020 (1.2%) before bouncing back 9.2% in 2021.

Output and incomes in emerging economies are predicted to return to pre-pandemic levels in the second half of the year. The advanced economies generally won’t return to where they were until the end of 2021.

These are forecasts that might prove optimistic. Depending on conditions and programmes in place in each country, it is likely many business will not survive and many consumers will decide to remain cautious about their spending for some time.

IMF chief economist Gita Gopinath warns

much worse growth outcomes are possible and may be even likely – this would follow if the pandemic and containment measures last longer, emerging and developing economies are even more severely hit, tight financial conditions persist, or if widespread scarring effects emerge due to firm closures and extended unemployment.

Rarely has the trajectory of a downturn been harder to forecast.

Much will depend on the virus itself, on the way in which countries adjust their restrictions to deal with it, and on us. At the moment few of us are feeling good.The Conversation

John Hawkins, Assistant Professor, School of Politics, Economics and Society, University of Canberra

This article is republished from The Conversation under a Creative Commons license. Read the original article.


Lessons from the Great Depression: how to prevent evictions in an economic crisis



Eviction in Redfern, NSW, in 1934.
State Library of New South Wales

Vanessa Whittington, Western Sydney University

The queues of unemployed people outside Centrelink offices in recent days are reminiscent of the dole queues seen across Australia during the Great Depression of the 1930s.

At that time, most states provided inadequate food vouchers rather than cash to people in the form of income support payments. This made it particularly difficult for renters, many of whom were unemployed due to the mass closure of factories, to continue to pay rent.

In NSW, lower-income areas of Sydney were particularly badly hit by unemployment, and because the working class was a renting class, this quickly translated into homelessness.




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For example, male unemployment reached 38.9% in the then-working class suburb of Newtown by 1933, well above the NSW average of 32% and three times the rate in the affluent suburb of Vaucluse.

Tent cities sprang up in Sydney’s Domain and on the outskirts of the city in suburbs like La Perouse, such as the ironically named tent city, Happy Valley. Although this is likely to underestimate the numbers of homeless at the time, the 1933 census reported

33,000 people [were] travelling in the hope of work and 400,000 [were]
living in shelters made of ‘iron, calico, canvas, bark, hessian and other scavenged materials’.

Residents in Happy Valley in the 1930s.
State Library of New South Wales

COVID-19 and assistance for renters

There are distinct parallels between the severe economic downturn of the 1930s and the economic repercussions of the COVID-19 crisis in terms of mass business closures and worker layoffs.

The Australian government has estimated that one million Australians could become unemployed as a result of the coronavirus. However, it is not clear if this comprises only those who will be directly affected by business closures or includes people impacted by the flow-on effects.

Taking into account the current unemployment rate, an additional one million Australians would bring the rate to 13% of the Australian workforce, from my own estimates.

Although the increase in Centrelink payments announced by the Morrison government will help those workers suddenly without jobs, additional measures are needed to protect people who can’t pay their rents and are faced with possible eviction.




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The National Cabinet is working on a range of strategies to assist renters, including preventing landlords from evicting tenants directly impacted by the coronavirus and offering tax relief to landlords who reduce or waive rents.

But these need to be supplemented by strong legislative measures, such as the amendment passed by the NSW parliament this week that empowers the housing minister to ban evictions for renters for six months.

Emergency laws to protect renters are also currently being debated in Tasmania.

Queues of people formed outside Centrelink offices nationwide this week.
JOEL CARRETT/AAP

Staving off homelessness in the Great Depression

There is precedent for legislative reform of this kind from the Great Depression.

In response to the mass numbers of job losses in NSW, the government at the time, led by Premier Jack Lang, passed two pieces of legislation aimed at providing relief for renters. This legislation was very significant, as it was the first of its kind that afforded tenants across NSW any serious amount of protection.

One of the bills, passed as the Reduction of Rent Act 1931, reduced rents state-wide by 22.5% and made leases that did not acknowledge this reduction illegal.




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The other piece of significant tenancy reform was the Ejectments Postponement Bill 1931. This bill prohibited eviction from a dwelling house without an order of the court. If the court could be shown the rent could not be paid, the tenancy could be extended indefinitely.

In his second reading speech, William McKell, minister for justice in the Lang government, described the bill as “a bona fide effort to provide against hardship due to unemployment”.

As honourable members are aware, there is a large amount of unemployment, and there are many very deserving and reputable people who, unfortunately, are not able to pay their rent. It is a tragedy that people of that type, with their families, are being evicted from their homes, and the Government is desirous of preventing as far as possible evictions of that character.

Though the government was committed to helping renters, McKell clearly distinguishes between the deserving and undeserving unemployed in his speech, an unhelpful way of thinking that is still with us today.

Although it is not known how many evictions the reforms of 1931 prevented, the new laws were undoubtedly a boon for renters, given the news coverage of the time. Landlords and their representatives complained about the impact the laws had on their ability to evict tenants.

In fact, the Real Estate Institute noted the financial hardship the Ejectments Postponement Act was placing on landlords.

Hundreds of cases have been reported to the Real Estate Institute, where the owners of houses, dependent on rents for their livelihood, have been refused possession, and have also been refused relief under the dole system, on the grounds that they are property owners.

Unfortunately for renters, these reforms were relatively short-lived. The Lang government was sacked by the NSW governor in May 1932 and replaced in the next election by the more conservative United Australia Party and Country Party coalition government.

This change in government saw the passage of the Landlord and Tenant (Amendment) Act 1932, which repealed the Ejectments Postponement Act 1931. The rent reduction law was also made more favourable to landlords.

The interests of landlords were prioritised over those of unemployed renters, a salutary lesson to present governments not to let ideology and vested interests get in the way of needed reforms that will benefit a significant portion of the population during a crisis not of their making.The Conversation

Vanessa Whittington, PhD Candidate, Institute for Culture and Society, Western Sydney University

This article is republished from The Conversation under a Creative Commons license. Read the original article.


The Financial Crash of 1929



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